Apex Global Brands First Quarter Earnings

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Apex Global Brands First Quarter Earnings

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Apex Global Brands, (NASDAQ: APEX) is a global brand management and licensing organization. The company runs a portfolio of high-equity lifestyle brands. On June 16, the company announced the financial results for its first quarter of fiscal 2021.

For this first quarter, Apex Global Brands reported revenues of 4 million dollars. There is a decrease of 20 percent from 5.1 million dollars in the first quarter of the last year. On the decline in first quarter revenues, the company said in a statement that “reflects the non-renewal of Apex’s Cherokee license in Japan. This decrease in sales by the Apex Global Brands licensees related to Covid-19 shelter-in-place and similar orders”.

HIGHLIGHTS OF FIRST QUARTER FINANCIAL 2021 WITH COMPARISON TO FINANCIAL YEAR 2020:

REVENUE: The revenue of the company declined to $4.0 million from $5.1 million in last year.

This is mainly due to the COVID-19. All the revenue declined by approximately 20%.

Source: Business Quant

SELLING AND ADMINISTRATION EXPENSES: SG&A expenses of the company is declined to $2.9 million from $3.9 million in last year.

EBITDA: Adjusted EBITDA decreased slightly to $1.1 million in the current year from $1.2 million in the last year.

NETLOSS: Net loss of $1.8 million compared to a loss of $2.3 million in the last year.

Operating and Non-Operating Expenses: Selling, general and administrative expenses, which comprise of the Company’s normal operating expenses, were $2.9 million in the first quarter of Fiscal 2021. This a decrease of 25% from $3.9 million in the first quarter of the prior year.

This year-over-year decrease in SG&A reflects the beneficial impact of the Company’s restructuring efforts, which resulted in reduced spending for payroll, facilities and general operations in Fiscal 2021 compared to Fiscal 2020. This is in addition to cost-saving measures undertaken in response to the COVID-19 pandemic and the related shortfall in revenues.

The market capitalization of Apex and its revenue projections declined during the first quarter amid COVID-19 pandemic which necessitated a $5.4 million non-cash impairment charge to lower the book value of the Company’s goodwill. A $4.4 million non-cash impairment charge to lower the book value of the Company’s non-amortizing trademarks.

Interest expense was $2.2 million in the first quarter, which was consistent with interest expense in the first quarter of the last year.

The Company reported an income tax benefit of $9.4 million in the first quarter of Fiscal 2021, primarily due to the CARES Act, which changed federal regulations regarding the carryback of net operating losses.  The Company anticipates receiving refunds of previously paid federal income taxes of approximately $9.0 million from net operating loss carryback.

COVID-19 RESPONSE UPDATE

  • Expecting tax refunds of $9.0 million of previously paid federal taxes due to the CARES Act.
  • Received a $0.7 million Pay check Protection Program loan under the CARES Act.
  • Extended forbearance agreement with senior secured lender, including a suspension of interest and principal payments.

Profitability Measures

The loss was primarily due to the $9.8 million in non-cash impairment charges. The Company’s operating loss for the first quarter of Fiscal 2021 totaled $9.0 million.  In the first quarter of the prior year, the Company reported operating income of $0.6 million.

Net loss was $1.8 million in the first quarter of Fiscal 2021 and a loss of $0.33 per diluted share, on 5.6 million shares outstanding which is compared to net loss of $2.3 million, or a loss of $0.44 per diluted share, on 5.1 million shares outstanding, in the first quarter of the last year.

Adjusted EBITDA totaled $1.1 million in the first quarter of Fiscal 2021 compared to $1.2 million in the first quarter of the prior year.  This decline was minor as the Company’s lower revenues were substantially offset by reductions in SG&A.

FISCAL YEAR 2021 OUTLOOK

Due to the evolving and unpredictable nature of the COVID-19 pandemic and its impact on Apex Global Brand’s business while revenues are expected to be down year-over-year, so too will the Company’s expenses.

In response to the anticipated decline in revenues, Apex Global Brands has implemented cost-saving measures whose full effect will be more fully seen in the second quarter of Fiscal 2021.  The Company has minimum guarantees with many of its licensing partners that can support its royalty revenues, but the full extent to which these minimum guarantees will be maintained throughout the duration of the pandemic cannot be presently determined.

The Company has minimum guarantees with many of its licensing partners that can support its royalty revenues. The full extent to which these minimum guarantees will be maintained throughout the duration of the pandemic cannot be presently determined.

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